The boss of energy regulator Ofgem has called for more powers to make sure customers rather than investors get compensated when suppliers go bust.
Jonathan Brearley said shareholders of some firms “took advantage” of energy price spikes even after their companies had collapsed during the energy crisis.
Speaking to the Energy Security and Net Zero Committee of MPs on Wednesday, he said the practice “points to a fundamental problem that we have in terms of the extent of our powers”, and said ministers should give Ofgem the ability to tackle it.
Energy prices rocketed in 2022 after Russia’s invasion of Ukraine, causing many people to struggle to pay their gas and electricity bills.
It also prompted the collapse of more than 30 energy supply firms in less than a year, forcing millions of people to switch to new, sometimes more expensive suppliers.
But shareholders in some of the companies that went bankrupt still made money after that, Mr Brearley said.
That is because they had bought power at a fixed price before their company collapsed – a process known as hedging – then made money when the value of that energy rose even further later in the crisis.
He told MPs: “One of the massive frustrations for me during the crisis was seeing companies go bust, where shareholders then walked away with valuable energy hedges that grew in value over time as the crisis went on.”
The shareholders “were able to realise some of that value”, said Mr Brearley, adding that the amounts added up to “hundreds of millions of pounds” across multiple companies.
“We cannot fully control that, and I think we need the powers to do so,” he said.
The Ofgem chief did not name the companies he was referring to.
He added: “Quite frankly, before anybody else gets paid anything, customers need to be paid back.”
Mr Brearley was recently appointed for another five-year term at the helm of Ofgem, and will lead the regulator while the Government tries to deliver on its promise to decarbonise the power system by 2030.
He added: “We’re in a complex market with complex corporate structures … and we are seeing a huge change coming in the next few years.
“No one, including us, can guarantee there won’t be issues that customers need to deal with.
“I think the regulator should have the power to be able to identify where there’s been significant customer harm and ask for compensation when that happens.”
